By Austin
Modine for The
Register. This story was reproduced with
permission.
Microsoft is shelling out $240m for a 1.6 per cent stake,
helping the Facebook reach a $15bn valuation in its current
fund-raising company. This is a somewhat surreal price for a
company that will have revenues this year of maybe $150m, according
to analyst estimates.
And just think, a few short weeks ago, Microsoft CEO Steve
Ballmer was comparing Facebook with GeoCities, in an interview with
The Times. If he was trying to talk down the price, he
failed.
Microsoft might one day be able to flip its stake at a profit -
but that looks like a long term coming. The deal makes more sense
if it is seen as Microsoft paying to play: for the cash, it gets to
beat rival suitor Google for exclusive global third-party rights to
sell advertising on Facebook.
Microsoft had previously landed a deal to sell US banner
advertising on Facebook in August 2006. Today's announcement
expands the pact internationally — with approximately 60 per cent
of the site's nearly 50 million users registered outside the
US.
"The opportunity to further collaborate as advertising partners
is a big reason we have decided to take an equity stake, and is a
strong statement of our confidence in the long-term economics of
this partnership," Kevin Johnson, president of Platforms &
Services at Microsoft said.
Under the deal, Microsoft will sell banner ads, with both
companies splitting the revenue.
Palo Alto-based Facebook said the investment will allow it to
further expand overseas and develop an advertising system tailored
to its users.
© The Register
2007
